In today’s financial ecosystem, compliance and trust are non-negotiable. Every transaction, whether made by an individual consumer or a business entity, requires confidence that the counterparty is who they claim to be.
That’s where Know Your Customer (KYC) and Know Your Business (KYB) come in. These two compliance processes are often mentioned together, but they serve different functions. KYC verifies individuals. KYB verifies businesses—which themselves may be corporations, LLCs, partnerships, or even sole proprietors operating under their own names.
Both processes are vital. KYC is the regulatory foundation for consumer-facing businesses, while KYB ensures that organizations can confidently transact with other businesses. Together, they form a comprehensive framework for reducing fraud, managing risk, and staying compliant.
Know Your Customer (KYC) is designed to verify an individual’s identity and assess risk before they are onboarded. It is a key requirement under anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, enforced globally by authorities such as the Financial Action Task Force (FATF), the Bank Secrecy Act (BSA) in the U.S., and the EU’s AML directives.
The goals of KYC are threefold:
KYC generally requires:
Over the last decade, KYC has become increasingly sophisticated. Providers such as Trulioo, Onfido, Jumio, and Socure have emerged as leaders, leveraging AI and machine learning to verify identities in real time. This innovation has transformed KYC from a manual, paper-heavy process into a near-instant digital experience.
But KYC only covers individuals. Businesses require something deeper.
When your customer isn’t just a person but a business, KYC alone isn’t enough. A business is more than just a name—it is often a legal entity with its own registration, tax obligations, ownership structure, and potential risk exposure.
That’s where Know Your Business (KYB) comes in. KYB extends compliance to business entities by verifying not only the company itself but also the individuals behind it, such as beneficial owners and key executives.
KYB typically asks:
Middesk’s KYB 101 makes clear that this is not a simple matter of checking a single ID. Instead, it’s about piecing together fragmented and often inconsistent data across multiple sources.
While KYC and KYB are both compliance processes, they differ in important ways:
The key takeaway is that KYB is not “better” or “more advanced” than KYC. Instead, they are different. KYC ensures that individuals are legitimate. KYB ensures that businesses—including those run by individuals—are legitimate. Together, they create a complete compliance foundation.
Unlike KYC, where most countries have centralized identity documents, KYB in the U.S. faces unique structural challenges:
These challenges make business verification slower, costlier, and riskier compared to consumer onboarding.
Traditional KYB providers rely on black-box risk scores, designed to be interpreted by analysts in manual workflows. Enigma takes a more transparent and automated approach:
This approach helps reduce onboarding friction while meeting stringent compliance standards.
Crucially, KYC and KYB often overlap. A business entity might pass KYB checks, but regulators also require person-level verification of its beneficial owners. In practice:
This layered approach ensures both the business and the people behind it are legitimate.
The combination is essential in preventing common risks:
By integrating KYC and KYB together, financial platforms build a holistic defense against fraud and non-compliance.
The Enigma KYB API integrates with orchestration platforms like Alloy and Taktile, helping clients such as Wisetack and Chase build cost-efficient, multi-vendor compliance workflows. One payment processor cut per-call costs by 60% by using Enigma first for Secretary of State (SoS) matches, while improving approval rates with trusted sources beyond SoS filings.
Yet even with strong KYC + KYB strategies, manual reviews remain inevitable. Compliance analysts often spend 10–30 minutes per case resolving aliases, validating ownership, or digging through fragmented government records. Enigma’s Model Context Protocol (MCP) changes that.
Enigma MCP anchors reviews in a ground-truth business identity graph built from billions of federal, state, and municipal filings. It pre-resolves variations (e.g., DBAs vs. legal names), surfaces ownership hierarchies, and provides structured, source-attributed summaries. This reduces research time to minutes—or even seconds—while increasing confidence in match accuracy.
Some clients are now layering programmatic agents on top of MCP, automating straightforward reviews and escalating only complex exceptions, enabling compliance teams to scale without sacrificing rigor.
KYC and KYB serve different but complementary roles in compliance. KYC ensures that individuals are legitimate; KYB ensures that businesses are legitimate. Both are critical for reducing fraud, managing risk, and meeting regulatory requirements.
While KYC is now a relatively mature and standardized process, KYB remains fragmented and challenging—especially in the U.S., where state registries and ownership data are inconsistent. That’s why KYB solutions require not just data, but intelligent resolution, automation, and transparency.
Enigma is building the KYB infrastructure to meet this challenge. With instant verification, granular data, and explainable results, we help platforms onboard more good businesses faster—while maintaining the highest standards of compliance.
In a digital-first world, the winners will be those who can seamlessly verify both people and businesses. At Enigma, we’re making that possible.